How to Calculate and Build Property Management Budgets

Operating budgets must consider a project’s characteristics, service costs per sq m according to market prices, legal regulations and customer service standards. Therefore, planning and forecasting revenue and expenditure must be executed carefully by a team of experienced professionals based on a thorough understanding of the market, operations, and development trends. 

What is an Operating Budget? 

An operating budget lists all current and future costs and revenue. It is a careful plan that provides an overview of the current and future performance. 

Financial optimisation must be ensured from the early stages of development and is the base for calculating services when developers sell the properties. Improper financial planning can result in excessive or insufficient service fees, which influence sales and operations. Reasonable service fees will help attract potential customers and ensure long-term profitability and stability.  

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How to Create a Budget 

1. List all Revenue Streams 

Revenue can come from diverse sources and can include: 

• Management fees 
• Parking fees 
• Advertising space  
• ATMs or vending machines 
• Telecommunications profit sharing 

2. List all Costs and Expenses 

Smooth operations require investment and capital. Operational costs include:

a/ Operating Personnel  

This includes salaries for the in-house property management teams such as receptionists, managers, engineers, and customer services teams. 

b/ Outsourced services 

Outsources services support in-house operational fees and include public lighting, landscaping, street cleaning, insect control, security, cleaning and insurance inspection. The cost of these services must consider salaries for the contractors and the cost of the service itself.  

c/ Management Team Expenditure 

Management teams require office equipment and materials to do their jobs efficiently. This includes office equipment like stationery, paper, ink, and photocopiers. The engineering teams need technical and safety equipment like ladders or tools.  

d/ Consumables and Maintenance 

This includes water, electricity, technical repairs, wastewater treatment, and chemicals for cleaning and pool maintenance.  

Electricity use differs between office and residential projects. Office buildings usually have fixed hours from 8 AM to 6 PM, Monday to Friday. Meanwhile, residential projects need electricity throughout the day and during the evenings and often have increased demand during festive periods. Therefore, when budgeting electricity costs, developers must have a realistic understanding of use and operations.  

Specialist consultants like Savills have a deep understanding of real estate operations and can accurately create operational budgets. Savills delivers: 

• Data on average operating costs given its track record with similar projects. 
• Design and technical documentation based on characteristics of a building; insights on the required equipment, machinery, and technology. 
• Conditions, terms, and service contracts that correspond to the needs of the building. 
• Laws and regulations related to operating costs. 
• Solutions that cater to market trends and demand for energy and resource savings. 
• Optimised operational and cost strategies.

Miscalculated operating budgets can harm sales, competitiveness, and performance, which impact the long-term sustainability and profitability of a built asset. Developers must implement proper budgets from the start to ensure future stability. 

Find out more about our budgeting and service charge consultancy. 

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